Ruminations on a (partially) wasted youth.
Orthodox economics in the Anglophone countries has produced a great deal of research yielding various sorts of positive conclusions about the viability of (surprise surprise) the status quo: Anglo-American capitalism. The joint stock corporation reigns supreme and this means we don’t have perfect competition, but if you look at the models you will see that the countervailing pressure of competition keeps prices and production at levels which ensure that, over the long run and of course ceteris parabis, we will be materially better off than with any other political economy.
That isn’t to say there is not dwelling within the orthodoxy a modicum of truth. Predictably the system of thought is not built around a complete fiction. Economic models possess a non-trivial predictive power. But their predictive power is demonstrated in only a very narrow range of contexts, and even there controversy exists.
Orthodox economists can argue over which trend line best fits the data points. They can argue over what interpretation is best for understanding the trend lines. They can even argue over what the relative changes in variable values means in terms of welfare and utility for particular segments. What they cannot honestly argue is the great quantity of dislocations which are observable from the historical data. The volatility of the system should be uncontroversial. What they probably won’t discuss are the psychic effects of that volatility, because that is beyond the scope of their training.
I received my professional training as an economist and when I was finished I fancied myself as quite knowledgeable about human affairs. What a fool I was. I have subsequently come to work as a decision maker in a capacity which populates the intersection of medicine and law. I’ve come to know quite a bit about anatomy, physiology, and pathology. The most interesting cases for me are those individuals with mental disabilities. Human beings are creatures with an extraordinary range of mental capacities. Incredibly dynamic is the mind of man.
Economists posit that human beings are rational, which strictly speaking means they are capable of weighing one thing against another in the real world. People with psychoses can do nothing of the sort. They suffer varying degrees of detachment from reality. Psychoactive states impede rational thought. Even people with common anxiety disorders can be incapable of clear thought when they are suffering a panic attack, which some of them suffer daily, and others with severe versions can even suffer near-constant panic. People with compulsive disorders have to contend with nagging obsessive thoughts that they don’t even feel responsible for and engage in obsessional rituals which lead them to devote unnecessary time and effort to often bizarre tasks—time and effort which even they believe would be better devoted to other pursuits.
When confronted about the quality of the rationality assumption, economists often retort that the rationality assumption is a rather modest proposal: it simply means that people will tend to do what they believe is in their best interest.
But people are incredibly self-destructive. Not only that, they are self-destructive in complex ways. Persistent feelings of guilt and shame can turn an individual against themselves and they can do what they consider to be contrary to their own self-interest. Often these self-destructive actions go on for years; one typically sees substance abuse in these cases. Some people who are not directly destructive of their own physical or emotional integrity can exhibit self-loathing toward their family, their society, or other identifiable group, perhaps humanity itself, and may even try to undermine the group, taking themselves down with it. Some people will avoid healthy relationships, or even relationships altogether. People may live anhedonic lifestyles in spite of overwhelming loneliness and some unrecognized semblance of a desire for affection.
There’s more to the story than just the human mental body system. Earlier when I said psychic effects, I meant psychic as an anachronistic way of saying psychological. But I don’t have an anachronistic view of psychology. Mental states have some correspondence to brain states, though at present I cannot describe the correspondence very well and I don’t think the vocabulary of brain talk will ever be sufficient for robustly discussing mental phenomena. A person can suffer a traumatic brain injury after being in a motor vehicle collision and wake up from their coma a different person. Their tastes and preferences may be different. Their personality may be different. Their family may not recognize the person they’ve become. They may not recognize their family, per se. Changes in the brain change the mind, and these changes may be organic, due to some pathology, or caused by an external force. It’s hard to imagine, but you didn’t become the person you are by a progressive succession of conscious changes through cogitation. You are who you are because the way your brain has developed, and the causes of that development are not all physiological, that is either congenital or developmental (not to be self-contradictory, I mean development in two different senses). You are not completely in control of you, the feeling that you are is illusory.
But economics and psychology have something in common with almost all Western sciences (if you even see fit to call them that), they look for regularity. Regularity appeals to the mind. Dealing with lots of irregularity is stressful and has effects on the mind which can manifest to some degree after some time. And the irregularity of volatile markets, one of the essential features of Anglo-American capitalism, can affect people. The uncertainty can lead to insecurity, and insecurity to pathological processes, and pathological processes to irrational actions.
And that’s the irony of it all isn’t it? Orthodox economics in the Anglophone countries may be self-defeating: the more it justifies Anglo-American style capitalism, the more the volatility and alienation of just such a system as corporatism creates mentally unfit people, the less predictive power economics will have. The more free market extremism is practiced the more people will turn absolutely crazy and of course the less their behavior will look anything like that of a rational agent.
Soon economics will have defensible predictive worth in a narrower range of contexts, and will be limited to institutional actors—contrary to prevailing reductionist tendencies. People in their institutional roles have to follow rules and procedures which induce regularity and cut down on the noise of individual agent choice. That’s why those bastions of the free market, corporations, are ironically the most bureaucratic institutions in our society. Their rigidities offer some regularity that free "free" markets don’t, which impel the need for constant transactions, at least on a time-scale within the scope of human perception (Coaseian economics). Contract fees are a small price to pay for cutting down the volatility. That is the kind of irony ignored by our economic theory, which is not unlike an Alzheimer’s patient, as it maintains its blithe optimism for cruel capitalism because of an insulated ahistorical perspective—the eternal sunshine of the spotless mind. It would seem, as I’ve argued, our economics may be suffering from a terminal condition.